Hard-working Brits could lose out on thousands of pounds in "stealth taxes" drawn up by the Government.
Rishi Sunak and his Chancellor Jeremy Hunt are looking at extending the freeze on Income Tax and National Insurance thresholds as they battle to fix the economic havoc caused by Liz Truss.
The threshold where you start paying 20p Income Tax and 12p National Insurance - £12,570 - have already been frozen for four years until April 2026.
It is understood that the Chancellor is now drawing up plans to freeze these thresholds for two more years in the upcoming Autumn Statement - taking it to April 2028.
Mr Hunt would also freeze the £50,270 threshold at which you start paying 40p Income Tax.
The Treasury would net £4bn a year under this extra stealth tax rise, according to the Resolution Foundation - by dragging even more people into higher tax brackets as salaries rise with inflation.
The first year of the freeze happened in April 2022, so it is already counted in what you earn now.
Analysis by Quilter - below - lays bare how much worse off you’ll be compared to now in April 2028, after five more years of freezes.
Exactly how much worse off you'll be depends on how fast wages grow. Historically they've risen at about 3%, but inflation is now running much higher.
The faster wages grow, the more people are dragged in to paying higher tax - and the bigger the hit to them from not raising tax thresholds.
How much worse off you'll be with 3% wage growth
Starting salary |
1 year |
2 years |
3 years |
4 years |
5 years |
£25,000.00 |
£75 |
£153 |
£233 |
£316 |
£400 |
£35,000.00 |
£75 |
£153 |
£233 |
£316 |
£400 |
£50,000.00 |
£321 |
£708 |
£1,106 |
£1,517 |
£1,939 |
£70,000.00 |
£377 |
£765 |
£1,165 |
£1,577 |
£2,002 |
£100,000.00 |
£977 |
£1,983 |
£3,020 |
£4,088 |
£5,187 |
How much worse off you'll be with 4% wage growth
Starting salary |
1 year |
2 years |
3 years |
4 years |
5 years |
£25,000.00 |
£101 |
£205 |
£314 |
£427 |
£545 |
£35,000.00 |
£101 |
£205 |
£314 |
£427 |
£545 |
£50,000.00 |
£447 |
£967 |
£1,509 |
£2,072 |
£2,657 |
£70,000.00 |
£503 |
£1,026 |
£1,569 |
£2,135 |
£2,723 |
£100,000.00 |
£1,303 |
£2,658 |
£4,067 |
£5,532 |
£7,056 |
How much worse off you'll be with 5% wage growth
Starting salary |
1 year |
2 years |
3 years |
4 years |
5 years |
£25,000.00 |
£126 |
£258 |
£396 |
£542 |
£695 |
£35,000.00 |
£126 |
£258 |
£396 |
£542 |
£695 |
£50,000.00 |
£572 |
£1,229 |
£1,919 |
£2,643 |
£3,403 |
£70,000.00 |
£628 |
£1,288 |
£1,981 |
£2,708 |
£3,472 |
£100,000.00 |
£1,628 |
£3,338 |
£5,134 |
£7,019 |
£8,500 |
Shaun Moore, tax and financial planning expert at Quilter, said: "These calculations illustrate the power of fiscal drag and how freezing income tax thresholds is a form of stealth tax.
"Ultimately, if thresholds remain frozen for a number of years, then you will end up paying considerably more tax.
"Thresholds at present are meant to remain frozen until 2026 but with the cost-of-living crisis weighing heavy on government spending this could be extended."
Mr Hunt and Mr Sunak have warned that difficult decisions will be needed to get the public finances back on track after Liz Truss's disastrous mini-Budget.
The Chancellor is preparing to unveil his Autumn Statement on November 17, which is expected include eye-watering cuts to public spending.
Downing Street today said the PM could no longer commit to any of the pledges made in the summer leadership contest or the Tory 2019 manifesto.
The PM’s press secretary said they would all now be reviewed to see if they are “deliverable” and “realistic”.
